Miramar Mining Corporation
TSX : MAE
AMEX : MNG

Miramar Mining Corporation

April 02, 2007 22:42 ET

Miramar Announces 2006 Year End Results

Year End Financial Results Show Healthy Financial Position

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - April 2, 2007) - Miramar Mining Corporation (TSX:MAE)(AMEX:MNG) today announced its consolidated 2006 annual financial results reporting a loss of $2.0 million for the year. The Company ended 2006 with consolidated working capital of $143.7 million, which includes cash and short term investments of $149.8 million.

"2006 was one of the most successful in Company history. Doris North permitting progressed positively through the environmental assessment phase and we anticipate, depending upon timely receipt of all licences and permits, that the project will commence production in late 2008. Two opportunities for large scale production to follow Doris North were identified and the 2006 programs, which were the largest to-date on the belt, continued to demonstrate the potential of these opportunities. We also completed two major equity financings during the year, allowing us to end 2006 in a very strong cash position and with no long-term debt," said Tony Walsh, Miramar's President and CEO.

The Company is now incorporating the results of the 2006 work into a Preliminary Assessment ("PA"). The PA will identify the best option for production after Doris North and contemplates either a 6,000 tonne per day underground operation or a 16,000 tonne per day open pit operation. Both options rely on a single processing facility at Madrid and incorporate ore from the Madrid, Boston and Doris deposits. The PA will assist management and the Board of Directors in identifying the option that offers the best return for Miramar shareholders. The decision as to which option has been selected is expected to be announced the second quarter of 2007.

An updated Feasibility Study for the Doris North project will also be completed and released in the second quarter of 2007. The initial study was done in 2003 was based on lower commodity and gold prices. As a result of higher prices for commodities and materials and changes contemplated to the plant design, the Company expects that the capital requirements for Doris North will have increased. Higher current gold prices are expected to more than offset these increases allowing the project to continue to generate robust economics.

The 2007 work program at Hope Bay has begun; the programs include 72,000 meters of drilling to be completed during the year for a cost of $31 million. It is anticipated that the first drill results will be available by the end of April.

The Company intends to release the 2006 resource calculation by mid-April.

Financial Results

For the year ended December 31, 2006, the Company reported a consolidated net loss of $2.0 million or $0.01 per share compared to a loss of $11.0 million of $0.07 per share in 2005. The losses reported in 2005 and 2006 include adjustments of $3.4 million and $8.1 million respectively to increase the asset retirement obligation for the Con Mine.

Interest and other income totalled $9.1 million in 2006 compared to $2.0 million in 2005. Interest income was higher in 2006 by $3.7 million largely due to higher cash balances following the equity financings completed in 2006 as well as higher realized interest rates. Other income in 2006 includes the net proceeds from the sale of assets including a final cash payment of $2.0 million relating to the assignment of the Back River option agreement to Dundee Precious Metals and a gain of $2.0 million on the sale of shares in Sherwood Copper Corporation and American Gold Capital Corporation. Also included in the 2006 results is the effect of the future tax rate changes which were approved in June 2006 by the Canadian Federal government. These changes reduced the Company's estimated income tax rate from 34.1% to 31.0% for future income taxes thereby reducing the future tax liability by $2.5 million.

Miramar Mining Corporation

Miramar is a Canadian gold mining company that controls the Hope Bay project, one of the largest, high-grade undeveloped gold deposits in Canada. The Hope Bay project extends over 1,000 sq. km. and encompasses one of the most prospective undeveloped greenstone belts in Canada.

Miramar's goal is to build an intermediate gold production profile by maximizing the development potential of the substantial gold resources defined on the Hope Bay belt while continuing to increase the total gold resources on the belt through the expansion of the known deposits and discoveries of new ones.

Any proposal to extend and expand mining operations at Hope Bay would be subject to successful completion of additional drilling, economic studies and permitting procedures.

For more information on Miramar Mining Corporation and its projects, visit our website at www.miramarmining.com.

Forward-Looking Statements

Statements relating to permitting, exploration activities and the expected results thereof, and the production potential at the Hope Bay project and the expected results of this work, the Company's goals to develop the Hope Bay property and its expenditures concerning reclamation activities and costs at the Con Mine are forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995. Forward looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects", "plans", "anticipates", "believes", "intends", "estimates", "projects", "potential" and similar expressions, or that events or conditions "will", "would", "may", "could" or "should" occur. Information inferred from the interpretation of drilling results and information concerning mineral resource estimates may also be deemed to be forward-looking statements, as it constitutes a prediction of what might be found to be present when and if a project is actually developed. These forward-looking statements are subject to a variety of risks and uncertainties which could cause actual events or results to differ materially from those reflected in the forward-looking statements, including, without limitation: risks related to fluctuations in gold prices; uncertainties related to raising sufficient financing to fund the planned work in a timely manner and on acceptable terms; changes in planned work resulting from weather, logistical, technical or other factors; the possibility that results of work will not fulfill expectations and realize the perceived potential of the Company's properties; uncertainties involved in the estimation of gold reserves and resources; the possibility that required permits may not be obtained on a timely manner or at all; the possibility that capital and operating costs may be higher than currently estimated and may preclude commercial development or render operations uneconomic; the possibility that the estimated recovery rates may not be achieved; risk of accidents, equipment breakdowns and labour disputes or other unanticipated difficulties or interruptions; the possibility of cost overruns or unanticipated expenses in the work program; the risk of environmental contamination or damage resulting from Miramar's operations uncertainties as to the timing, results and costs of reclamation activities at the Con Mine and possible need to secure the remediation plan in the light of future development and other risks and uncertainties, including those described in the Miramar's Annual Report on Form 40-F for the year ended December 31, 2006 and Reports on Form 6-K filed with the Securities and Exchange Commission.

Forward-looking statements are based on the beliefs, estimates and opinions of Miramar's management on the date the statements are made. Miramar undertakes no obligation to update these forward-looking statements management's beliefs, estimates or opinions, or other factors, should change.

This news release has been authorized by the undersigned on behalf of Miramar Mining Corporation.

Consolidated Financial Statements

(Expressed in Canadian dollars)

MIRAMAR MINING CORPORATION

Years ended December 31, 2006 and 2005



KPMG LLP Telephone (604) 691-3000
Chartered Accountants Fax (604) 691-3031
PO Box 10426 777 Dunsmuir Street Internet www.kpmg.ca
Vancouver BC V7Y 1K3
Canada


AUDITORS' REPORT TO THE SHAREHOLDERS

We have audited the consolidated balance sheets of Miramar Mining Corporation as at December 31, 2006 and 2005 and the consolidated statements of operations and deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2006 and 2005 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles.

KPMG LLP

Chartered Accountants

Vancouver, Canada

March 2, 2007, except as to note 15(d) which is as of March 30, 2007

KPMG LLP, a Canadian limited liability partnership is the Canadian member firm of KPMG International, a Swiss cooperative.



MIRAMAR MINING CORPORATION
Consolidated Balance Sheets
(Expressed in thousands of Canadian dollars)

December 31, 2006 and 2005

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2006 2005
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Assets

Current assets:
Cash and cash equivalents $ 145,800 $ 48,723
Short term investments 3,957 20,000
Accounts receivables 1,781 1,135
Inventory (note 3) 5,243 4,782
Power credits (note 2(n)) 389 389
Prepaid expenses 322 355
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157,492 75,384

Power credits (note 2(n)) 780 1,168
Property, plant and equipment (note 4) 6,547 5,569
Mineral properties (note 5) 204,892 170,817
Cash collateral deposits (note 6) 15,263 14,980
Investment in Northern Orion
Explorations Ltd. (note 7) 6,305 8,505
Other assets (note 8) 2,616 1,574

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$ 393,895 $ 277,997
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Liabilities and Shareholders' Equity

Current liabilities
Accounts payable and accrued liabilities $ 4,976 $ 4,748
Current portion of site reclamation and
closure costs (note 10) 8,473 5,947
Current portion of deferred gain (note 2(n)) 389 389
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13,838 11,084

Deferred gain (note 2(n)) 780 1,168
Provision for site reclamation and
closure costs (note 10) 11,002 14,536
Future income tax liability (note 12) 25,981 22,801
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51,601 49,589

Shareholders' equity:
Share capital (note 11) 551,480 433,990
Contributed surplus 5,213 6,846
Deficit (214,399) (212,428)
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342,294 228,408

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$ 393,895 $ 277,997
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Nature of operations (note 1)
Commitments and contingencies (notes 11 and 15)
Subsequent event (note 15 (d) and (g))

See accompanying notes to consolidated financial statements.

Approved on behalf of the Board:

Director Director


MIRAMAR MINING CORPORATION
Consolidated Statements of Operations and Deficit
(Expressed in thousands of Canadian dollars, except per share amounts)

Years ended December 31, 2006 and 2005

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2006 2005
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Expenses:
Depreciation, depletion and accretion $ 1,379 $ 1,088
General and administration 1,726 1,520
Salaries 1,643 1,217
Stock-based compensation 1,277 985
Professional services 1,170 592
Investor relations 490 119
Interest and penalties 472 241
Foreign exchange (11) 2
Severances and closure 1,832 264
Write-down of assets (note 7) 2,200 108
Write-down of asset retirement obligation
capitalized (note 10) 3,356 8,085
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15,534 14,221
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Loss before undernoted (15,534) (14,221)

Other income (expense):
Interest income 4,826 1,156
Other income (notes 5 and 8) 4,260 875
Equity loss - (227)
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9,086 1,804
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Loss before income taxes (6,448) (12,417)

Income tax recovery (expense) (note 12):
Current 14 (34)
Future 4,463 1,460
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4,477 1,426
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Loss for the year (1,971) (10,991)
Deficit, beginning of year (212,428) (201,437)
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Deficit, end of year $ (214,399) $ (212,428)
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Basic and diluted loss per share $ (0.01) $ (0.07)

Weighted average number of
common shares outstanding 200,572,424 163,744,437
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See accompanying notes to consolidated financial statements.


MIRAMAR MINING CORPORATION
Consolidated Statements of Cash Flows
(Expressed in thousands of Canadian dollars)

Years ended December 31, 2006 and 2005

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2006 2005
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Cash provided by (used in):

Operations:
Loss for the year $ (1,971) $ (10,991)
Items not involving cash:
Depreciation, depletion and accretion 1,379 1,088
Stock-based compensation 1,277 985
Write-down of assets 5,556 8,193
Gain on sale of assets (4,048) -
Future income taxes (4,463) (1,460)
Equity loss - 227
Other 412 18
Changes in non-cash working capital:
Accounts receivable (690) 1,205
Inventory (461) 595
Prepaid expenses 33 (88)
Accounts payable and accrued liabilities (345) (3,165)
Payments made on site reclamation (note 10) (5,559) (8,138)
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(8,880) (11,531)

Financing:
Issue of common shares for cash 118,423 58,289
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118,423 58,289
Investments:
Expenditures on plant, equipment and
deferred exploration (32,227) (18,413)
Proceeds from (purchase of) short-term investments 16,043 (20,000)
Proceeds on sale of assets 4,041 10,769
Purchase of collateral deposits, net (323) (306)
Purchase of securities - (300)
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(12,466) (28,250)
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Increase in cash and cash equivalents 97,077 18,508
Cash and cash equivalents, beginning of year 48,723 30,215

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Cash and cash equivalents, end of year $ 145,800 $ 48,723
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Supplementary information:
Income taxes paid $ - $ 34
Interest received 4,461 994
Non-cash investing and financing activities:
Fair value of stock options allocated to
shares issued on exercise 4,358 107
Stock-based compensation included in
deferred exploration 1,449 944
Recognition of future income tax liabilities
to mineral properties 2,351 -
Asset retirement obligations capitalized to
property, plant and equipment 3,356 8,085
Common shares received on option agreement
(note 5) 745 -
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See accompanying notes to consolidated financial statements.


MIRAMAR MINING CORPORATION
Notes to Consolidated Financial Statements
(Tabular dollar amounts expressed in thousands of Canadian dollars)

Years ended December 31, 2006 and 2005

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1. Nature of operations:

Miramar Mining Corporation (the "Company") was incorporated under the laws of the Province of British Columbia. In December, 2004, the Company made the decisions to terminate all mining activities at its Con Mine and Giant mine operations and to commence planned reclamation activities. Therefore, at December 31, 2006 and 2005, the Company's principal business activity is the exploration and development of mineral property interests. The Company's principal mineral property interest is the Hope Bay Project located in Nunavut, Canada.

The Company is in the process of exploring its mineral property interest and has not yet determined whether its mineral property interest contain economically recoverable mineral reserves. The underlying value and the recoverability of the amounts shown for mineral property is entirely dependent upon the existence of economically recoverable mineral reserves, the ability of the Company to obtain the necessary financing to complete the exploration and development of the mineral property, and future profitable production or proceeds from the disposition of the mineral property interest.

2. Significant accounting policies:

(a) Basis of presentation:

These financial statements have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP"). These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All material inter-company balances and transactions have been eliminated.

(b) Cash and cash equivalents:

Cash and cash equivalents include investments with terms to maturity of 90 days or less when purchased. Cash collateral deposits are carried at cost.

(c) Short-term investments:

Short-term investments with terms to maturity of greater than 90 days but not more than one year are recorded at the lower of cost and market determined on an aggregate portfolio basis.

(d) Revenue recognition and inventory:

Revenue from sale of the Company's product is recorded when pervasive evidence of an arrangement exists, title and risk passes to the buyer and the sales price is fixed and determinable. Gold and silver inventory are valued at the lower of net realizable value and cost. Materials and supplies inventory are valued at average cost less appropriate allowances for obsolescence.

(e) Property, plant and equipment and mineral properties:

Property, plant and equipment, which includes mine plant and equipment and mineral properties, is recorded at the lower of cost and estimated net recoverable amount. Buildings and equipment are depreciated on a straight-line basis over their estimated useful lives. Office furniture and computer equipment are depreciated using the declining balance method at 20% and 30%, respectively. Leasehold improvements are amortized straight-line over their estimated useful life.

The cost of mineral properties and related exploration and development costs are deferred until the properties are placed into production, sold or abandoned. Capitalized costs are amortized over the estimated useful life of the properties following the commencement of production or written off if the properties are sold, allowed to lapse or abandoned.

(f) Impairment of long-lived assets:

Long-lived assets, which consist primarily of property, plant and equipment and mineral properties, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of assets to be held and used are measured by a comparison of the carrying value of the asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the amount of the impairment is measured by the amount by which the carrying amount of the asset exceeds its fair value.

(g) Provision for site reclamation and closure costs:

The Company recognizes the fair value of a future asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that results from the acquisition, construction, development and/or normal use of the assets. The Company concurrently recognizes a corresponding increase in the carrying amount of the related long- lived asset which is amortized over the life of the asset. The fair value of the asset retirement obligation is estimated using the expected cash flow approach that reflects a range of possible outcomes discounted at a credit-adjusted risk-free interest rate. Subsequent to the initial measurement, the asset retirement obligation is adjusted at the end of each period to reflect the passage of time and changes in the estimated future cash flows underlying the obligation. Changes in the obligation due to the passage of time are recognized in income as an operating expense using the interest method. Changes in the obligation due to changes in estimated cash flows are recognized as an adjustment of the carrying amount of the related long-lived asset and is amortized over the remaining life of the asset.

(h) Pension expenses and obligation:

The Company maintains defined benefit pension plans and provides certain non-pension post- retirement benefits consisting of extended health and other benefits. The cost of providing pension and other post-retirement benefits is actuarially determined and charged to operations using the projected unit credit actuarial method based upon management's best estimate assumptions. Pension fund assets are valued at fair value. The pension expense for the year includes adjustments for plan amendments, curtailments, experience gains and losses, and changes in assumptions that are being amortized on a straight-line basis over the expected average remaining service lives of the plan members. Any differences between the cumulative amounts expensed and the funding contributions are reflected as either an asset or a liability.

(i) Stock-based compensation:

The Company has a stock option plan which is described in note 11(c). The Company records all stock-based payments using the fair value method.

Under the fair value method, stock-based payments are measured at the fair value of the consideration received or the fair value of the equity instruments issued or liabilities incurred, whichever is more reliably measurable, and are charged to operations over the vesting period. The offset is credited to contributed surplus. Consideration received on the exercise of stock options is recorded as share capital and the related contributed surplus is transferred to share capital.

(j) Translation of foreign currency:

The accounts of foreign operations are translated into Canadian dollars as follows:

- monetary assets and liabilities at the rates of exchange prevailing at the balance sheet date

- other assets and liabilities at applicable historical exchange rates

- revenue and expenses at the average rate of exchange for the period covering the statement of operations except for expenses related to non-monetary assets which are at the rates used for the translation of the related assets

Translation gains and losses are included in the statement of operations.

(k) Income taxes:

The Company uses the asset and liability method of accounting for future income taxes. Under the asset and liability method, future income tax assets and liabilities are determined based on differences between the financial statement carrying values of existing assets and liabilities and their respective income tax bases (temporary differences) and loss carry forwards. Future income tax assets and liabilities are measured using substantively enacted or enacted tax rates expected to be in effect when the temporary differences are likely to reverse. The effect on future income tax assets and liabilities of a change in tax rates is included in the results of operations in the period in which the change is substantively enacted. Future income tax assets also result from unused loss carry forwards, resource related pools and other deductions. The amount of future tax assets recognized is limited to the amount that management considers more likely than not to be realized.

(l) Flow-through common shares:

Canadian tax legislation permits a company to issue flow-through shares whereby the deduction for tax purposes relating to qualified resource expenditures is claimed by the investors rather than the Company. Recording these expenditures for accounting purposes gives rise to taxable temporary differences.

When flow-through expenditures are renounced, the Company records the tax effect as a reduction to share capital and an increase to future income tax liabilities. To the extent that the Company has future income tax assets that were not recognized in previous years, due to the recording of a valuation allowance, a future income tax recovery is recorded in the statement of operations.

(m) Loss per share:

Basic loss per share is calculated by dividing loss available to common shareholders by the weighted average number of common shares outstanding in the period. For all periods presented loss available to common shareholders equals the reported loss. Diluted loss per share is calculated by the treasury stock method. Under the treasury stock method, the weighted average number of common shares outstanding for the calculation of diluted loss per share assumes that the proceeds to be received on the exercise of dilutive stock options are applied to repurchase common shares at the average market price for the period.

For the years ended December 31, 2005 and 2006, diluted loss per share is the same as basic loss per share as the affect of all outstanding options and warrants (note 11) would be anti-dilutive.

(n) Power credits and deferred gain

On April 4, 2003, the Company completed the sale of the Bluefish hydroelectric power plant ("Bluefish") to Northwest Territories Power Corporation. Bluefish is a 7.0 mega volt-ampere hydroelectric power generating facility, located 25 miles of Yellowknife, which supplies power to the Company's Con Mine. Sale consideration included a non-interest bearing note for $10 million which was paid on December 31, 2004, the supply of power to the Con Mine, free of charge, equal to the historic generation profile of Bluefish until December 31, 2004 and the supply of power to the Con Mine, free of charge, at an annual rate of 5 million kilowatts and 18,000 kilo volt-ampere of demand for a five year period from 2005 to 2009 (the "Power Credits"). The Company recorded a deferred gain of $7.0 million relating to the fair value consideration of the Power Credits. During the year ended December 31, 2006, approximately $0.4 million (2005 - $0.4 million) of the fair value of the Power Credits were consumed and has been recorded in site closure and reclamation costs incurred along with a reduction to the corresponding deferred gain. The Company expects to utilize approximately $0.4 million of the Power Credits, and recognize the same amount of the deferred gain in 2007. Therefore, $0.4 million has been classified as current.

(o) Use of estimates:

The preparation of financial statements requires management to make estimates that affect the reported values of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant areas requiring the use of management estimates relate to the determination of the impairment of assets, site reclamation and closure obligations, assumptions used in determining stock-based compensation, future income tax valuation allowances and rates for amortization of property, plant and equipment. Actual results could differ from these estimates.

(p) Comparative figures:

Certain comparative figures have been restated to conform to the current year's financial statement presentation.

3. Inventory:



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2006 2005
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Residual gold and silver $ 29 $ 1,162
Materials and supplies 5,214 3,620

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$ 5,243 $ 4,782
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4. Property, plant and equipment:



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2006 2005
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Accumulated
depreciation
and Net book Net book
Cost depletion value value
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Mine plant and equipment $ 118,017 $ 115,923 $ 2,094 $ 2,105
Exploration equipment 3,411 691 2,720 1,614
Construction in progress 1,177 - 1,177 1,217
Computer equipment 1,398 1,019 379 505
Leasehold and office 609 432 177 128
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Total $ 124,612 $ 118,065 $ 6,547 $ 5,569
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5. Mineral properties:

The following is a summary of exploration and development costs incurred related to the Company's Hope Bay Project:



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2006 2005
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Balance, beginning of year $ 170,817 $ 160,003

Additions:
Drilling 7,447 3,997
Sample analysis 1,122 532
Personnel and contracts 4,507 3,336
Stock-based compensation 1,449 944
Supplies and equipment 1,933 931
Other exploration costs 1,134 627
Title and claim management 431 317
Transportation and freight 5,687 2,908
Camp and infrastructure 3,057 1,531
Environmental and permitting 3,636 3,157
Feasibility and studies 2,066 958
Future income taxes related to the above 2,351 -
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34,820 19,238

Disposition of mineral property (745) (8,424)

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Balance, end of year $ 204,892 $ 170,817
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On February 18, 2005, the Company assigned to Dundee Precious Metals Inc. ("Dundee") its option to purchase from Kinross Gold Corporation 60% of the Back River project, including the Goose and George Lakes deposits. During the year ended December 31, 2005, the Company received proceeds of approximately $10 million for the reimbursement of past exploration costs and inventory acquisition incurred by the Company on the Back River Project plus 5%. During the year ended December 31, 2006, the Company received a final cash payment of $2.0 million pursuant to the sales agreement upon the project reaching a milestone as set out in the agreement. As no capitalized costs associated with the Back River Project remain recorded in mineral properties, the $2.0 million payment has been recorded as part of other income in the statement of operations.

On September 20, 2004, the Company completed an option agreement with Maximus whereby Maximus can earn a 75% interest in the Eastern Contact and Twin Peaks areas of Hope Bay by spending $7.5 million scheduled over a three-year period. In consideration for entering the option agreement, Maximus is to pay the Company five million shares of Maximus as repayment for past expenditures on the properties, issued over a three-year period. Additional shares could also be issued to the Company at specific resource milestones. To December 31, 2006, the Company had received 3.5 million shares of Maximus which it has been recorded as part of other assets, with a corresponding decrease of $0.7 million recorded against the Hope Bay mineral property.

6. Cash collateral deposits:

The Company has established cash deposits with chartered banks to serve as collateral for letters of credit pledged in favour of various governmental agencies and others under several water licenses and mineral exploration and mining agreements. The Company has also established two reclamation security trusts for the reclamation of the Con Mine (note 15(c)). The deposits are invested in guaranteed investment certificates and bear interest at market rates ranging from 3.5% to 4.3%. These funds will be returned to the Company upon completion of reclamation of the property to which they relate. Cash collateral deposits are as follows:



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2006 2005
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Con Mine reclamation security trust $ 10,873 $ 10,506
Con Mine road permit - 50
Golden Eagle reclamation 307 341
Talapoosa reclamation 233 233
Hope Bay water licenses and land permits 3,850 3,850

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$ 15,263 $ 14,980
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7. Investment in Northern Orion Explorations Ltd.:

At January 1, 2005, the Company had 200,247 shares of Northern Orion Explorations Ltd. ("Northern Orion") and a net proceeds interest royalty ("NPI") in a Northern Orion mineral property which it acquired pursuant to a restructuring agreement with Northern Orion. The NPI entitles the Company to receive the economic equivalent of a 2.5% net smelter return on the Northern Orion's mineral property as well as 50% of the proceeds from the disposition of the Northern Orion mineral property, all to a maximum of $15 million. During 2005, the Company sold all remaining shares of Northern Orion and recorded the proceeds as a reduction of the carrying value.

During the year ended December 31, 2006, the Company recorded a write down of $2.2 million to reduce the carrying value of the investment as a result of a change in the estimated fair value of future cash flows expected to be received from the NPI on proceeds on disposition. Recovery of the remaining carrying value of $6.3 million is dependant upon the receipt of net proceeds from eventual production from the mineral property or its sale by Northern Orion.

8. Other assets:



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2006 2005
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Pension asset (note 13) $ 1,604 $ 1,260
Investment in Sherwood Copper Corporation
("Sherwood") 187 180
Investments 781 134
Nunavut Tunngavik deposit 44 -

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$ 2,616 $ 1,574
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During the year ended December 31, 2006, the Company sold a portion of its shares in Sherwood and its other investments, realizing a gain of $2.0 million that is included in other income in the statement of operations.

9. Related parties:

At December 31, 2006, the Company holds 7.3% of Maximus Ventures Ltd ("Maximus"), a company related by virtue of a common director. The Company supplied services on a cost recovery basis to Maximus totaling $1,047,304 (2005 - $1,188,680) during the year ended December 31, 2006.

During the year ended December 31, 2005, the Company's investment in Sherwood was reduced from 38.3% to 13.3% as a result of Sherwood issuing shares to outside interests. During the period in 2005 the Company had significant influence over Sherwood, the Company supplied services on a cost recovery basis to Sherwood totaling $122,344.

These transactions are recorded at their exchange amount in these consolidated financial statements which is the amount of consideration received as established and agreed to by the Company and, as appropriate, Maximus or Sherwood.

10. Site reclamation and closure:

The Company has recorded provisions for the estimated cost of site closure and reclamation relating to past mining activities at the Con Mine and the Hope Bay Project. The following is a reconciliation of the changes in the provision for site reclamation and closure during the year:



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2006 2005
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Balance, beginning of year $ 20,483 $ 19,759
Change in estimate for site closure and
reclamation costs 3,356 8,085
Site closure and reclamation costs incurred (5,559) (8,138)
Accretion expense 1,195 777

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Balance, end of year $ 19,475 $ 20,483
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Allocated between:
Current portion $ 8,473 $ 5,947
Non-current portion 11,002 14,536

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$ 19,475 $ 20,483
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The Company's operations are affected by federal and local laws and regulations concerning environmental protection. Under current regulations, the Company is required to meet performance standards to minimize environmental impact and to perform site restoration and other closure activities. The Company's provisions for future site closure and reclamation costs are based on known requirements. It is not currently possible to estimate the impact on financial results, if any, of future legislative or regulatory developments.

During the year ended December 31, 2006, the Company recorded an adjustment to increase the liability for site closure and reclamation obligations by $3.4 million (2005 - $8.1 million). This adjustment results from: an increase to the expected cost of post-closure water treatment, a longer period of site monitoring, the addition of a contingency measure to treat additional water from the underground mine (if the water reaches the surface) for the period of 2015 and 2030, and an increase in the cost of reclaiming and processing arsenic contaminated tailings in 2007 as a result of expected costs increases for operating labour, supplies and other related costs.

Although the ultimate amount to be incurred is uncertain, the liability for site closure and reclamation for the Con Mine has been estimated on an undiscounted basis before inflation to be $22.1 million and is to be expended from 2007 to 2050. For purposes of determining the fair value of the obligation, a credit-adjusted risk-free discount rate of 9.8% and an inflation factor of 2.0% have been applied.

As required by GAAP, cost estimates include contractor markups, provision for administration and engineering and a provision for unforeseeable circumstances. However, the Company expects to use its employees wherever possible to complete the reclamation activities, which could eliminate a portion of these costs. The Company has $10.9 million on deposit in Con Mine reclamation security trusts that will be applied, in part, to offset the reclamation costs as they are incurred. The Company is required by regulatory agencies to post security for the site closure and reclamation activities, excluding the arsenic processing activities, and, based on the Company's estimate for these costs, the Company does not currently anticipate that the regulatory agencies will require additional funds to be contributed to the reclamation security trusts.

11. Share capital:



(a) Authorized:
500,000,000 common shares without par value

(b) Issued:

--------------------------------------------------------------------
--------------------------------------------------------------------
Common shares
------------------------
Number
of shares Amount
--------------------------------------------------------------------

Balance, December 31, 2004: 159,774,830 $ 380,734

Issued:
Common shares for cash, net of issue costs 26,070,000 57,679
Future income tax effect of
flow-through shares - (5,140)
On exercise of stock options 456,600 717
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Balance, December 31, 2005 186,301,430 433,990

Issued:
Common shares for cash, net of issue costs 25,342,820 108,637
Future income tax effect of
flow-through shares - (5,291)
On exercise of warrants 366,000 750
On exercise of stock options 5,114,788 13,394

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Balance, December 31, 2006 217,125,038 $ 551,480
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On November 30, 2006, the Company completed a private placement offering of 2,040,820 flow-through shares at $7.35 per share for total gross proceeds of $15 million. The underwriter received a cash commission of 4% of the gross proceeds in payment for their services. The Company will be required to incur Canadian exploration expenditures as defined by the Income Tax Act (Canada) totaling $15 million by December 31, 2007.

On June 26, 2006 the Company entered into two concurrent equity underwriting agreements comprised of a public offering of 19,200,000 common shares at $4.17 per share and a private placement of 2,989,000 flow-through shares at $5.20 per share. On July 12, 2006, the Company completed the closing of these two financings for aggregate gross proceeds of $95.6 million. As part of the public offering, the Company granted the underwriters an over-allotment option exercisable for a period of 30 days following the closing. On August 11, 2006 the underwriters exercised the over-allotment option and purchased 1,113,000 common shares for additional gross proceeds of approximately $4.6 million. As required by the private placement flow through agreement, the Company must incur Canadian exploration expenditures as defined by the Income Tax Act (Canada) totaling approximately $15.5 million by December 31, 2007.

On November 22, 2005, the Company completed a private placement to Newmont Mining Corporation of Canada Limited ("Newmont") of 18.5 million units at a price of $2.35 per unit for gross proceeds of $43.5 million. Each unit consisted of one common share and one warrant to purchase an additional common share at $2.75 per common share until November 22, 2009.

On October 14, 2005, the Company completed a private placement of 250,000 flow-through common shares at a price of $2.05 per common share for gross proceeds of $512,500. Pursuant to the financing agreement, the Company must incur Canadian exploration expenditures as defined in the Income Tax Act (Canada) in the amount of $512,000 by December 31, 2006, which amount has been incurred.

On September 30, 2005, the Company completed a private placement of 7,320,000 flow-through common shares at a price of $2.05 per common share for gross proceeds of approximately $15 million. In consideration for their services, the underwriters received commissions of $0.8 million and brokers' warrants exercisable to purchase 366,000 common shares at $2.05 per common share until September 30, 2006. The fair value of these warrants at the grant date was $0.1 million and has been shown on a net basis in share capital. Pursuant to the financing agreement, the Company must incur Canadian exploration expenditures as defined in the Income Tax Act (Canada) in the amount of $15,000,000 by December 31, 2006, which amount has been incurred.

(c) Stock options:

Stock options are granted at the closing market price of the common shares on the last trading day before the date of grant. Options have a maximum term of ten years and usually terminate 30 days following the termination of the optionee's employment. The vesting periods of stock options granted vary with terms determined by the Board of Directors. At December 31, the Company had stock options outstanding as follows:



--------------------------------------------------------------------------
--------------------------------------------------------------------------
2006 2005
---------------------- ----------------------
Average Average
Share exercise Share exercise
options price options price
--------------------------------------------------------------------------

Outstanding,
beginning of year 7,449,684 $ 1.87 6,263,578 $ 2.18
Granted 3,322,342 2.93 3,054,706 1.32
Exercised (5,114,788) 1.77 (456,600) 1.33
Forfeited or expired (598,600) 1.85 (1,412,000) 2.24

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Outstanding, end of year 5,058,638 $ 2.67 7,449,684 $ 1.87
--------------------------------------------------------------------------
--------------------------------------------------------------------------

Exercisable 3,549,559 2.49 6,921,684 $ 1.83
--------------------------------------------------------------------------
--------------------------------------------------------------------------


The stock-based compensation costs reflected in the consolidated financial statements were estimated using the Black-Scholes option pricing model with the following weighted average assumptions: a risk-free interest rate of 3.9% (2005 - 3.6%), a dividend yield of 0% (2005 - 0%), an expected volatility of 60% (2005 - 60%) and expected lives of stock options of 5 years (2005 - 4.85 years). The weighted average fair value of options granted in 2006 was $1.54 (2005 - $1.38).

As at December 31, 2006, 3,549,559 options were fully vested and expire as follows:



--------------------------------------------------------------------
--------------------------------------------------------------------
Year Number Exercise price
--------------------------------------------------------------------

2007 150,000 $ 2.63
2008 436,676 1.89
2009 1,227,981 3.22
2010 878,706 1.28
2011 856,196 2.98
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--------------------------------------------------------------------


Exercisable options exclude options which are contingent on future performance targets (290,000 options) and options which are restricted from exercise pending approval of an increase in the stock option plan (1,219,078 options).

(d) Warrants and brokers compensation options:

At December 31, the Company had warrants and brokers' compensation options outstanding and exercisable as follows:



--------------------------------------------------------------------------
--------------------------------------------------------------------------
2006 2005
---------------------- ----------------------
Warrants Average Warrants Average
and exercise and exercise
options price options price
--------------------------------------------------------------------------

Outstanding,
beginning of year 18,866,000 $ 2.74 1,316,267 $ 2.26
Granted - - 18,866,000 2.74
Exercised (366,000) 2.05 - -
Forfeited or expired - - (1,316,267) 2.26

--------------------------------------------------------------------------
Outstanding, end of year 18,500,000 $ 2.75 18,866,000 $ 2.74
--------------------------------------------------------------------------
--------------------------------------------------------------------------


The warrants outstanding at December 31, 2006 were granted to Newmont as described in note 11(b).

12. Income and resource taxes:

At December 31, 2006, the Company has unused tax loss carry forwards in Canada of $48.3 million (2005 -$46.2 million) expiring between the years 2006 and 2025 which are available to reduce taxable income and capital losses of $58.2 million (2005 - $68.2 million) which are available indefinitely, but can only be utilized against capital gains. The Company has investment tax credits totaling approximately $2.6 million (2005 -$1.8 million). The tax effect of the significant components within the Company's future tax asset (liability) at December 31 was as follows:



--------------------------------------------------------------------
--------------------------------------------------------------------
2006 2005
--------------------------------------------------------------------

Loss carry forwards $ 12,870 $ 14,509
Capital losses 10,383 12,752
Property, plant and equipment 18,504 19,561
Canadian resource deductions 1,855 3,745
Reclamation liabilities 6,037 7,368
Other 2,523 1,517
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52,172 59,452
Valuation allowance (47,553) (54,508)
--------------------------------------------------------------------
Net future tax asset 4,619 4,944

Future income tax liability of Hope Bay Gold (7,620) (8,382)
Future income tax liability on
flow-through shares (22,980) (19,363)

--------------------------------------------------------------------
Net future income tax liability $ (25,981) $ (22,801)
--------------------------------------------------------------------
--------------------------------------------------------------------


The income tax expense differs from the amounts computed by applying the combined federal and provincial income tax rate of 34.1% (2005 - 34.1%) to pre-tax losses as a result of the following:



--------------------------------------------------------------------
--------------------------------------------------------------------
2006 2005
--------------------------------------------------------------------

Loss before equity loss and income taxes $ 6,448 $ 12,190
--------------------------------------------------------------------
--------------------------------------------------------------------

Computed "expected" tax recovery $ 2,199 $ 4,157
Adjustment to income taxes resulting
from change in valuation allowance,
net of related changes in tax rates and other (1,626) 367
Adjustment to future tax assets and
liabilities for enacted changes in tax rates 2,598 (1,200)
Permanent differences (868) (1,158)
Share issue costs 2,049 453
Capital taxes - (34)
Other 125 (1,159)

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Income tax recovery $ 4,477 $ 1,426
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--------------------------------------------------------------------


13. Pension plan and other post-retirement benefits:

The Company has three defined benefit pension plans covering substantially all of the employees at the Con Mine and the Giant Mine. These plans are funded on an ongoing basis, based on periodic actuarial valuations and statutory requirements. In addition, the Company, by practice, provides for other post-retirement benefits. The ultimate liability for these benefits is estimated for accounting purposes on an ongoing basis using periodic actuarial calculations.

Summary information related to the defined benefit pension plans and other benefits are as follows:



--------------------------------------------------------------------------
--------------------------------------------------------------------------
Pension benefit plans Other benefit plans
--------------------- ---------------------
2006 2005 2006 2005
--------------------------------------------------------------------------

Accrued benefit obligation $ 18,449 $ 18,880 $ 303 $ 176
Fair value of plan assets 17,022 15,790 - -
--------------------------------------------------------------------------

Funded status - plan deficit (1,427) (3,090) (303) (176)
Unamortized actuarial loss 3,031 4,350 18 20
Unamortized past service costs - - 204 -

--------------------------------------------------------------------------
Accrued benefit asset
(liability) $ 1,604 $ 1,260 $ (81) $ (156)
--------------------------------------------------------------------------
--------------------------------------------------------------------------


Reconciliation of accrued benefit obligation:

--------------------------------------------------------------------------
--------------------------------------------------------------------------
Pension benefit plans Other benefit plans
--------------------- ---------------------
2006 2005 2006 2005
--------------------------------------------------------------------------

Balance, beginning of year $ 18,880 $ 17,182 $ 176 $ 158
Current service cost 193 230 - -
Interest cost 898 998 7 7
Benefits paid (1,430) (3,023) (84) (78)
Plan improvement - - 204 -
Actuarial (gain) loss (326) 3,425 - 89
Loss due to curtailment 234 68 - -

--------------------------------------------------------------------------
Accrued benefit obligation,
end of year $ 18,449 $ 18,880 $ 303 $ 176
--------------------------------------------------------------------------
--------------------------------------------------------------------------


Reconciliation of plan assets:

--------------------------------------------------------------------------
--------------------------------------------------------------------------
Pension benefit plans Other benefit plans
--------------------- ---------------------
2006 2005 2006 2005
--------------------------------------------------------------------------

Fair value, beginning of year $ 15,790 $ 16,282 $ - $ -
Expected return on plan assets 1,089 1,063 - -
Employer contributions 955 847 - -
Benefits paid (1,430) (3,023) - -
Actuarial gains 618 621 - -

--------------------------------------------------------------------------
Fair value of plan assets,
end of year $ 17,022 $ 15,790 $ - $ -
--------------------------------------------------------------------------
--------------------------------------------------------------------------


Pension expense during the year for the pension plans is $601,200 (2005 - $457,200). Other benefit plans expense for the year is $8,700 (2005 - $61,800). Pension expense for the year was comprised of the following:



--------------------------------------------------------------------
--------------------------------------------------------------------
2006 2005
--------------------------------------------------------------------

Current service cost $ 193 $ 230
Interest cost 898 998
Expected return on plan assets (1,089) (1,063)
Amortization of experience gains 365 136
Amortization of past service costs - 89
Loss due to curtailment 234 68

--------------------------------------------------------------------
$ 601 $ 458
--------------------------------------------------------------------
--------------------------------------------------------------------


The measurement date for the plan assets and the benefit obligation was December 31, 2006. Payments are being made to fund the excess of the accrued benefit obligation over the fair value of plan assets in accordance with applicable legislation. The effective date of the final actuarial valuations is the date which the plan is terminated which was June 30, 2006 for the Giant Mine plan and October 31, 2006 for one of the Con Mine plans.

The significant actuarial assumptions used in 2006 and 2005 in the measurement of the Company's benefit obligation are shown in the following table:



--------------------------------------------------------------------
--------------------------------------------------------------------
Pension Other
benefits benefits
--------------------------------------------------------------------

Discount rate used for
accrued benefit obligation 5.00% 5.00%
Discount rate used for benefit costs 4.50% 5.00%
Expected long-term rate of
return on plan assets 7.00% N/A
Weighted average rate of compensation increase N/A N/A
--------------------------------------------------------------------
--------------------------------------------------------------------

The actual allocation of plan assets is shown in the following table:

--------------------------------------------------------------------
--------------------------------------------------------------------
2006 2005
--------------------------------------------------------------------

Cash and short-term $ 224 $ 139
Bonds 6,057 5,879
Canadian Equity Pension Trust 2,653 2,478
Dividend Income Fund 7,606 7,082
Overseas equities 482 212

--------------------------------------------------------------------
$ 17,022 $ 15,790
--------------------------------------------------------------------
--------------------------------------------------------------------


The Company has a Supplemental Executive Retirement Plan for senior executives (the "SERP"). The SERP provides that the Company will pay to each executive on retirement or termination of employment a benefit equal to the difference between the amount of the Company's contributions to the executive's individual RRSP plan and investment returns thereon and a pension amount based upon such executive's years of service and salary averaged over the highest consecutive 60 months of employment. The SERP obligations are not funded by the Company until retirement or termination of employment and therefore the SERP had a deficit at December 31, 2006 of $0.7 million (2005 - $0.6 million). At December 31, 2006, the accrued benefit liability related to the SERP, after taking into account unamortized net actuarial losses and past service costs, is $0.3 million (2005 - $0.4 million), which is recorded in accounts payable and accrued liabilities.

14. Financial instruments:

Fair value estimates are made at the balance sheet date, based upon relevant market information and information about the financial instrument. These estimates are, in part, subjective in nature and involve uncertainties in significant matters of judgment. Changes in assumptions and market conditions could significantly affect these estimates. The carrying values of all financial instruments approximate fair values, except for investments presented in other assets. The fair value of the investment in Northern Orion currently approximates carrying value based on management's estimate of fair value.

The fair value of other investments and the fair value based on the quoted market value of the investment in Sherwood at December 31 are as follows:



--------------------------------------------------------------------
2006 2005
------------------ -----------------
Carrying Fair Carrying Fair
value value value value
--------------------------------------------------------------------

Investment in Sherwood $ 187 $ 8,457 $ 180 $ 3,634
Other investments 782 1,464 134 974
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15. Commitments and contingencies:

(a) Miramar Con Mine Ltd. ("MCML") is committed to the purchase of approximately $600,000 of liquid oxygen through to August 31, 2007 subject to an ongoing purchase option in the Company's favour at the discounted value of the remaining payments.

(b) As part of the arrangement to sell a previously owned hydro electric asset, the Company entered into an indemnity agreement with NERCO Minerals Company ("NERCO"), the previous owners of the Con Mine, in which the Company agrees to hold NERCO harmless against any future third party claims that relate to environmental conditions of the Con Mine. The terms of the indemnity agreement provide for no limitation to the maximum potential future payments under the guarantee. The Company has not provided for any current carrying amount of the liability, contingent or otherwise, for the obligations under the guarantee. The Company has granted the indemnification in order to allow NERCO to release a similar guarantee provided by Red Lion Management Ltd. ("Red Lion") in connection with the acquisition of the Con Mine. Red Lion held a security interest in all the assets of the Con Mine, including the hydro electric asset, as collateral for the indemnity against environmental liability given to NERCO. As security for the indemnification given to NERCO, the Company has granted a security interest on the Con Mine assets to NERCO and agreed that the net proceeds from the sale of these assets will be placed in a reclamation security trust, to be used to pay for the reclamation of the mine.

(c) On August 8, 2000, MCML received a renewal water licence for the Con Mine issued under the Northwest Territories Waters Act. This licence expired on July 29, 2006 and an extension was granted to January 30, 2008. As a condition of a water license held by the MCML, the Company maintains security deposits for the cost of future reclamation. In 2004, the Company completed an agreement with DIAND to fund security deposits by depositing $10 million into two reclamation security trusts established by the Company. The reclamation security trusts will be used to fund the reclamation of the site on completion of operations.

(d) In 1995, the Company entered into a joint exploration transaction with an investor that resulted in a renunciation of certain resource expenses being made to the investor. The amount of the renunciation was based upon an independent valuation prepared for the Company relating to the Con Mine assets. In 2000, the Canada Revenue Agency ("CRA") issued a reassessment notice challenging the valuation that formed the basis for this transaction. The reassessment does not give rise to any taxes payable by the Company. However, as part of the original transaction, the Company agreed to compensate the investor for any shortfall in the renunciation made by the Company to a maximum of $2.7 million plus accrued interest. Subsequent to December 31, 2006, the Company and the CRA reached a settlement regarding the reassessment which preserves the amount of the renunciation originally made to the investor. Accordingly, the Company no longer has a contingent liability with respect to possible payments to the investor.

(e) The Company has a long-term lease for office space for its corporate and exploration office. The Company has minimum commitments under operating leases for its premises totaling approximately $340,000 per annum from 2007 to 2009 and $260,000 per annum for 2010 to 2012. The Company has a number of operating leases for mobile and other equipment used at its exploration properties with lease terms ranging from one to two years, which in aggregate result in commitments of $611,000 in 2007 and $95,100 in 2008.

(f) In September 2006, the Company signed the Inuit Impact and Benefits Agreement with the Kitikmeot Inuit Association ("KIA") which establishes the terms which will apply to Doris North mine operations with respect to benefits to the Inuit people of the Kitikmeot region. Included in the agreement are specific payments to the KIA which would be made totaling $1.4 million subject to the successful completion of certain project milestones such as a positive production decision made by the Company and receipt of its water license. Also in September 2006, the Company completed a water compensation agreement with the KIA for the use of the proposed lake for tailings disposal which establishes total compensation of $0.9 million to be paid by the Company over a three year period following a positive production decision made by the Company.

(g) Subsequent to December 31, 2006, the Company entered into a purchase commitment of approximately $5.7 million to acquire a 118-person camp facility from a manufacturer. Under the terms of the agreement, the Company will pay for the construction costs prior to its shipment to the Hope Bay site, which is expected to be in July 2007. The Company has the right to transfer its obligations under the purchase agreement to a third party.

MIRAMAR MINING CORPORATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

This Management's Discussion and Analysis ("MD&A") provides an analysis of the financial results of Miramar Mining Corporation (the "Company") for the year ended December 31, 2006 compared with the same period in the previous year. In order to better understand the MD&A, it should be read in conjunction with the annual consolidated financial statements for the years ended December 31, 2006 and 2005 and related notes. The Company's consolidated financial statements are prepared in accordance with Canadian generally accepted accounting principles ("Canadian GAAP") and expressed in thousands of Canadian dollars, except per share amounts. In addition, the Company files an annual report on Form 40-F with the United States Securities and Exchange Commission, which include the Company's annual consolidated financial statements and a supplementary note reconciling the material differences between Canadian GAAP and United States GAAP, and their effect on the Company's financial information. This MD&A is dated as of March 30, 2007. All amounts are expressed in Canadian dollars, except as otherwise indicated.

OVERVIEW

The Company's mining and exploration assets are primarily gold assets in the Canadian Arctic. The Company has developed considerable experience in operations, exploration and logistics in the Canadian Arctic where the Company has focused its activities for more than ten years. In 2004, the Company terminated all mining activities at its Con and Giant mines in Yellowknife, Northwest Territories. Since then, the Company's business has been focused on the exploration and development of the Hope Bay gold mineral project in Nunavut (the "Hope Bay Project"). The Hope Bay Project is 100% owned by the Company and extends over 1,000 square kilometers. The Company believes the project encompasses one of the most prospective undeveloped greenstone belts in Canada. The belt contains a number of significant gold deposits including the Doris North deposit which the Company expects to become the first new gold mine in Nunavut.

The Company's goal is to become an intermediate gold producer through the phased development of the Hope Bay Project.

- Phase 1: Short-term: Develop a small scale, high return gold mine at Doris North with the objective of generating significant cash flow, after capital payback, to advance the subsequent phases while minimizing equity dilution. A feasibility study on the Doris North deposit prepared in early 2003 concluded a two year mine at Doris North which could produce approximately 155,000 ounces of gold per year (the "Doris North Project") was feasible.

- Phase 2: Medium-term: Extend and expand production levels to a targeted production level of either approximately 300,000 ounces per year or 600,000 ounces per year. The potential mining alternatives which are under consideration in technical and economic studies are: a) an underground operation with a targeted production of approximately 6,000 tonnes per day and focused on developing the higher grade, more accessible upper portions of the Boston, Doris Central and Madrid deposits, and b) a larger scale ("Large Pit Concept") operation with a targeted production of approximately 16,000 tonnes per day, based upon open pit mining at Madrid and underground mining at the Boston and Doris deposits.

- Phase 3: Longer-term: Continue exploration efforts at Hope Bay with the objective of discovering new deposits and expanding the current known resources in order to provide additional resources to extend mine production.

To achieve these objectives, the Company needs to successfully complete, among other things, the current permitting process for the Doris North Project, complete financing for mine construction, successfully construct and place into production the Doris North deposit, complete technical and economic studies on Phase 2 development of the Boston, Doris and Madrid deposits and identify additional resources, complete feasibility studies on Phase 2 and complete permitting on Phase 2.

2006 HIGHLIGHTS

- On March 6, 2006, the Nunavut Impact Review Board ("NIRB") issued its final hearing report recommending to the Minister of Indian and Northern Affairs Canada that the Doris North Project should proceed. On July 28, 2006 the Minister accepted the recommendation. On September 20, 2006, NIRB finalized the terms and conditions of the Doris North Project and issued a project certificate.

- On April 20, 2006, the Company released an update to the resources at the Hope Bay Project. The update increased the total by 2.6 million ounces of gold or 40% over the prior year's calculation, assuming the Large Pit Concept discussed above.

- On June 26, 2006, the Company entered into two concurrent equity underwriting agreements, one relating to a public offering of 19,200,000 common shares at $4.17 per share and the other to a private placement of 2,989,000 flow-through shares at $5.20 per share. On July 12, 2006, the Company completed both offerings and received aggregate gross proceeds of $95.1 million. As part of the public offering, the Company granted the underwriters an over-allotment option. On August 11, 2006 the underwriters exercised the over-allotment option and purchased 1,113,000 common shares for additional gross proceeds of approximately $4.6 million.

- A total of approximately 66,000 meters of exploration drilling was completed during the year ended December 31, 2006 focused largely in the Madrid deposit area. The significant results included: significant incepts at Suluk of wide gold mineralization; gold mineralization encountered in key gaps between the Suluk and Rand deposits; extension of mineralization on the Naartok East and Rand deposits; and a new type of mineralization was discovered approximately 400 meters north of the main Boston deposit.

- On August 24, 2006, the Company reported that the initial results of engineering studies supported potential mining options of either 6,000 tonnes per day or 16,000 tonnes per day for the next phase of Hope Bay development and these options would be the focus of further studies.

- On September 6, 2006, the Company and the Kitikmeot Inuit Association ("KIA") signed the Inuit Impact and Benefits Agreement ("IIBA"). The IIBA establishes the terms which will apply to Doris North with respect to benefits to the Inuit people of the area.

- On November 30, 2006, the Company completed an equity private placement of 2,040,820 flow-through common shares at $7.35 for total gross proceeds of $15.0 million.

- The Company's net loss for the year ended December 31, 2006 was $2.0 million or $0.01 per share.

OPERATIONS OVERVIEW

Selected Financial Data

The following tables summarize total revenue, loss and loss per share over the last three fiscal years and the last eight fiscal quarters (in thousands of dollars except per share amounts).



----------------------------------------------------------
2006 2005 2004

Revenue/other income $ 9,087 $ 2,031 $ 12,265
Earnings/(loss) $ (1,971) $ (10,991) $ (32,459)
Per share $ (0.01) $ (0.07) $ (0.21)
----------------------------------------------------------


--------------------------------------------------------------------
2006 2006 2006 2006
Q4 Q3 Q2 Q1

Revenue/other income $ 3,988 $ 1,762 $ 1,109 $ 2,228
Earnings/(loss) $ (3,151) $ 357 $ 1,906 $ (1,083)
Per share $ (0.01) $ - $ 0.01 $ (0.01)
--------------------------------------------------------------------
2005 2005 2005 2005
Q4 Q3 Q2 Q1

Revenue/other income $ 247 $ 171 $ 614 $ 999
Earnings/(loss) $ (8,348) $ (1,025) $ (481) $ (1,137)
Per share $ (0.05) $ (0.01) $ - $ (0.01)
--------------------------------------------------------------------


Earnings

For the year ended December 31, 2006, the Company had a net loss of $2.0 million or $0.01 per share compared to a net loss of $11.0 million or $0.07 per share in 2005. The losses reported in 2006 and 2005 include adjustments of $3.4 million and $8.1 million respectively to increase the asset retirement obligation for the Con Mine (see section headed "Critical Accounting Policies and Estimates" for additional discussion). Interest and other income totaled $9.1 million in 2006 compared to $2.0 million in 2005. Interest income was higher in 2006 by $3.7 million due largely to higher cash balances following the equity financings completed in 2006 as well as higher realized interest rates. At December 31, 2006 cash and short-term investments totaled $149.8 million which was $81.0 million higher than the balance at December 31, 2005. Other income in 2006 includes the net proceeds from the sale of assets including a final cash payment of $2.0 million relating to the assignment of the Back River option agreement to Dundee Precious Metals Inc. and a gain of $2.0 million on the sale of shares in Sherwood Copper Corporation and American Gold Capital Corporation. Also included in the 2006 results is the effect of the future tax rate changes which were approved in June 2006 by the Canadian federal government. These changes reduced the Company's estimated income tax rate from 34.1% to 31.0% for future income taxes and reduced the future tax liability by $2.5 million. This reduction has been recognized as a future tax recovery in the statement of operations.

Operating Costs

During the year ended December 31, 2006, general and administrative expenses, salaries, professional services, investor relations and other costs totaled $5.5 million compared to $3.7 million in 2005. The increase in 2006 is comprised of higher consulting and legal services for regulatory compliance ($0.6 million), higher investor relations related costs due to increased activity ($0.4 million), higher salaries and other administrative costs due to increased salaries and additional staff ($0.6 million) and higher interest and penalties ($0.2 million) for potential expenses which may result from environmental incidents at Hope Bay and Con Mine. Stock-based compensation was $1.3 million in 2006 compared to $1.0 million in the same period of 2005. The weighted average fair value of options granted and vested in 2006 was $1.54 per share option compared to $1.38 in 2005. Stock options which were granted in 2006, but are not exercisable subject to shareholder approval have not been included in the fair value calculations for 2006. For more detailed discussion on the stock-based compensation expense, see the discussion below under the heading "Critical Accounting Policies and Estimates". Depreciation, depletion and accretion expense in 2006 was $1.4 million compared to $1.1 million in 2005. In 2006, severance and closure costs were $1.8 million compared to $0.3 million for 2005. Of the severance and closure costs in 2006, $0.8 million was paid in cash in the year and the remainder includes an accrued amount for the future severance payments, an estimated loss on pension windup for the former employees at the Yellowknife mines and a mark-to-market adjustment on the fair value of certain options granted to a former employee to purchase certain common shares owned by the Company.

DISCLOSURE CONTROLS AND INTERNAL CONTROLS OVER FINANCIAL REPORTING

Disclosure Controls and Procedures

The Company has established policies and procedures with respect to continuous disclosure and public reporting requirements to its shareholders and the investment community. Issues arising from this policy are dealt with by the disclosure committee which consists of the Chief Executive Officer, the Chief Financial Officer, the Vice President Legal and the Manager of Investor Relations.

The mandate of the disclosure committee is to (i) ensure that requisite disclosure is made by the Company; (ii) ensure that all public disclosure made by the Company to its shareholders or the investment community, written, oral or electronic, is accurate and complete and is made on a timely basis as required by applicable laws, regulations and stock-exchange requirements; and, (iii) monitor the effectiveness and integrity of the Company's disclosure policies and procedures.

The certifying officers evaluated the effectiveness of the Company's disclosure controls and procedures as of December 31, 2006 and concluded that such controls and procedures are adequate and effective to ensure that information required to be disclosed by the Company in reports that it files or submits pursuant to the United States Securities Exchange Act of 1934, as amended ("Exchange Act") and pursuant to Canadian securities laws is (a) recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission rules and forms and by applicable Canadian securities laws; and (b) accumulated and communicated to the management of the Company, including its principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure as specified in Canadian and U.S. securities laws.

Management's Report on Internal Controls

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting ("ICFR"). The Company's internal control system was designed to provide reasonable assurance that all transactions are accurately recorded, that transactions are recorded as necessary to permit preparation of financial statements in accordance with Canadian GAAP, and that the Company's assets are safeguarded.

Management has assessed the effectiveness of the Company's ICFR reporting as at December 31, 2006. In making its assessment, management used the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") framework in Internal Control - Integrated Framework to evaluate the effectiveness of the Company's ICFR.

The Company determined that changes to the Company's internal control over financial reporting were required related to the process of recording stock-based compensation expenses and the calculation of the number of common shares reserved for the exercise of stock options. The changes in the Company's ICFR are described in "Changes in Internal Control Over Financial Reporting" below. With the changes implemented and except as disclosed in "Changes in Internal Control Over Financial Reporting" below, no material weaknesses in the Company's ICFR were identified by management.

In August 2006, the SEC announced a one year postponement for the auditor attestation on ICFR for small companies (under US $700M market capitalization as at June 30, 2006). As a result, the Company elected not to have an external audit of its ICFR, however, all necessary work to allow an external audit to occur was completed by the Company had it proceeded with the auditor attestation.

Changes in Internal Control over Financial Reporting

During the year ended December 31, 2006, the Company implemented changes to ICFR related to the process of recording stock-based compensation expenses and the calculation of the number of common shares reserved for the exercise of stock options.

In the first quarter of 2006, the Company issued 2.9 million stock options and recorded a non-cash stock option expense of $2.5 million to the consolidated statement of operations and deficit as well as capitalizing $1.2 million as deferred exploration expenditures. The maximum number of common shares permitted to be issued pursuant to the Company's stock option plan had been reached at this time and approximately 1.1 million of the stock options granted during the first quarter of 2006 may not be exercised unless shareholder approval to the granting of such options is obtained. As a result, stock-based compensation expense associated with the 1.1 million stock options should not have been recorded and in October 2006 the Company filed an amendment and restatement to its unaudited financial results for the first and second quarters of 2006 to reflect that change.

No other changes occurred in the Company's ICFR that has materially affected, or is reasonably likely to materially affect, the Company's ICFR.

General Statement on Disclosure Controls and Procedures and Internal Controls over Financial Reporting

The Company's management, including the Chief Executive Officer and Chief Financial Officer, does not expect that its disclosure controls and procedures or internal controls and procedures will prevent all error and all fraud. A control system can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of the Company's consolidated financial statements requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as well as the reported expenses during the reporting period. Such estimates and assumptions affect the determination of the potential impairment of long-lived assets, estimated costs associated with reclamation and closure of mining properties, and the determination of stock-based compensation and future income taxes. Management re-evaluates its estimates and assumptions on an ongoing basis; however, due to the nature of estimates, actual amounts could differ from its estimates. The most critical accounting policies upon which the Company depends are those requiring estimates of gold reserves and resources, future recoverable gold ounces and assumptions of future gold prices.

Accounting for Exploration and Development Costs

Exploration expenditures related to mineral properties are deferred only if it is probable that these costs will be recovered from future operations. The carrying values of mineral properties are assessed at the balance sheet date to determine whether any persuasive evidence exists that the properties may be permanently impaired. The Company's progress in its development activities towards its planned operations is a key factor to be considered as part of the ongoing assessment of the recoverability of the carrying amount of capital assets and deferred exploration and development costs. If there is persuasive evidence of impairment, the asset is written down to its estimated net recoverable value. Deferred acquisition, exploration and development expenditures totaled $204.9 million for Hope Bay at December 31, 2006.

Asset Retirement Obligations

Asset retirement obligations are the estimated costs associated with mine closure and reclamation and are recorded as a liability at fair value. The liability is accreted over time through periodic charges to operations. In addition, asset retirement costs are capitalized as part of each asset's carrying value at its initial discounted value and are amortized over the asset's useful life. In the event the actual costs of reclamation exceed the Company's estimates, the additional liability for retirement and remediation costs may have an adverse effect on the Company's future results of operations and financial condition.

The asset retirement obligation for the Con Mine is comprised of two components (1) processing of historic mill roaster tailings (arsenic contained within this material is rendered inert by a process which utilizes the pressure oxidation circuit); and, (2) site closure and monitoring activities, including building removal, capping of mine openings, restoration of tailings areas, water treatment and post-closure monitoring.

In the fourth quarter of 2006, the Company recorded an adjustment to increase the liability for asset retirement obligation by $3.4 million. This adjustment results from: an increase to the expected cost of post-closure water treatment; a longer period of site monitoring; the addition of a contingency measure to treat additional water from the mine underground, if water reaches the surface, which treatment is estimated to occur from 2015 through 2030; and an increase in the cost of reclaiming and processing historic mill roaster tailings in 2007 as a result of cost increases for operating labour and supplies and other related costs.

Although the ultimate amount to be incurred is uncertain, the liability for site closure and reclamation has been estimated on an undiscounted basis before inflation to be $22.1 million, to be expended from 2007 to 2050. For purposes of determining the fair value of the obligation, a discount rate of 9.8%, an inflation factor of 2.0% and a market risk premium have been applied. As required by regulatory policies and Canadian GAAP, cost estimates include contractor markups, provision for administration and engineering, provision for a market risk premium, and a provision for contingencies. However, the Company expects to use its employees wherever possible to complete the reclamation activities, which could reduce actual costs below the accrued liability. The Company has $10.9 million on deposit in Con Mine reclamation security trusts. The Company has committed the proceeds from any asset sales at the Con Mine to the reclamation security trusts and the funds in the trusts will be applied to offset in part the reclamation costs as they are incurred.

Key assumptions in estimating the asset retirement obligation for the Con Mine include the assumptions that: a) the processing of residual historic mill roaster tailings (calcines and arsenic bearing sludges) through the autoclave will be completed in 2007; b) final wash down of the blend plant storage pits will be completed in 2007; c) the final mine closure and reclamation should receive regulatory approval in 2007 allowing other site closure reclamation activities to commence in 2007 and essentially be completed over a three year period, including the removal of remaining buildings, capping of remaining mine openings, capping of the tailings containment areas and remediation of the site to the standard acceptable for industrial-use property; and, d) an allowance for ongoing water treatment for a period of approximately 25 years and an allowance for post closure environmental performance monitoring for a period of approximately 50 years.

Key assumptions in estimating the asset retirement obligation for the Hope Bay exploration camps include removal of exploration camps, reclamation of site pads and infrastructure, placement of surface stored waste rock underground at Boston and re-vegetation as needed. The estimate of the cost, based on contractor rates, of such reclamation activities is $1.3 million.

Stock-based Compensation

Stock-based compensation is accounted for using the fair value based method. Under the fair value based method, compensation cost is measured at fair value of the options at the date of grant and is expensed over the vesting period of the award. The Company estimates the fair value using the Black-Scholes option pricing model. The key assumptions used in 2006 were: a risk-free interest rate of 3.9%, a dividend yield of 0%, an expected volatility of 60% and expected term of stock options of 5 years. The weighted average fair value of options granted and vested in 2006 was $1.54 per share option. Stock options which were granted in 2006, but are not exercisable subject to shareholder approval of an increase of the Company's stock option plan, have not been recorded as an expense in the year ended December 31, 2006. The stock-based compensation expense will be recorded when, and if, the shareholders approve an increase to the stock option plan based on the estimated fair value of the options at the approval date. If the market price for the shares is higher on the approval date than the average strike price of $3.08 per share, the estimated fair value of these options will be higher than if the estimated fair value had been calculated based on the actual grant date. On the grant date, the strike price of the options held for approval was set based on the previous day's closing market price for the shares.

EXPLORATION AND DEVELOPMENT ACTIVITIES

The Company's focus continues to be on the Hope Bay Project. The Company is committed to a strategy of advancing the Hope Bay Project to a production decision while continuing to expand gold resources. The staged development strategy will focus first on the high grade gold Doris North Project, with the goal of generating cash flow to pay for mining infrastructure and to partially fund the subsequent development of a bulk tonnage operation at Madrid and a satellite mining operation at the Boston deposit which is approximately 50 kilometers south of the Doris North deposit area. The Company's exploration strategy will focus on expanding the size and increasing the confidence level of existing deposits and on continued exploration for new gold resources in order to support a sustained production profile. The Company will continue to conduct grassroots exploration alone and, in certain circumstances, in cooperation with strategic partners on selected portions of the Hope Bay mineral claims. To achieve these objectives, the Company needs to successfully complete, among other things, the current permitting process for the Doris North Project, complete financing for mine construction, successfully construct and place into production the Doris North deposit, complete technical and economic studies on Phase 2 development of the Boston, Doris and Madrid deposits and identify additional resources, complete feasibility studies on Phase 2 and complete permitting on Phase 2.

In 2006, the total deferred costs related to the Hope Bay Project were $34.8 million (see note 5 of the annual consolidated financial statements), comprised largely of approximately 66,000 meters of drilling. The bulk of the drilling was directed toward the ongoing resource expansion program which will generate information for the technical and economic studies ("TES") to support the next phase of development of Hope Bay, engineering and consulting costs for the TES and other studies and permitting and regulatory activities to continue to advance the Doris North Project and to commence base-line studies to support Phase 2 technical studies.

The Hope Bay exploration camp was re-opened in late February and the season's drilling activity commenced on March 11, 2006. Drilling activities were focused largely at the Naartok deposit which is in the Madrid deposit area and accounted for a total of 45,868 meters. Drilling totaling 20,106 meters was conducted at Boston, Doris, other deposits within Madrid and regional areas of interest (8,306, 3,114, 5,992 and 2,694 meters respectively).

The exploration activities in 2006 were successful in identifying and extending the mineralization on the deposits. Some of the significant results are as follows.

- Suluk - Hole 06PMD416 identified a shallow intercept of 13.4 g/t over 29.8 meters, hole 06PMD427 intercepted 3.2 g/t over 164 meters and 06PMD428 intercepted 9.1 g/t over 38.3 meters.

- Naartok East - Hole 06PMD448 was drilled targeting the Naartok East deposit approximately 100m from 2005 drill hole 05PMD328 which returned 11.6 g/t Au over 66.5m and approximately 65m from hole 05PMD274 which encountered 9.8 g/t over 64.2m. Hole 06PMD448 encountered 9.31 g/t Au over 93.5m including one narrow (0.3m) high grade sample which was reduced from 918 g/t (26 ounces per ton) to 200 g/t for composite averaging. The true width of hole 06PMD448 is estimated to be approximately 75% of core length. Additional drilling at Naartok East continued to expand the resource including hole 06PMD470 which encountered 34.9g/t over 9.7m. Also, in association with drilling between Naartok East and Rand, infill holes better defined the near surface portion of Naartok East including hole 06PMD497 which encountered 3.4 g/t over 81 meters including a higher grade interval of 7.4 g/t over 12 meters.

- Naartok East/Rand Gap - Drilling was successful in demonstrating reasonably continuous mineralization along what appears to be an extension of the "Z" lens which makes up the bulk of the mineralization at Naartok West. Hole 06PMD488 intercepted 2.6 g/t over 63 m and hole 06PMD486 intercepted 2.4 g/t over 36.2 meters.

- Madrid Exploration - Drilling at Madrid extended the Naartok East deposit beyond historical boundaries. Hole 06PMD454 was drilled 120 meters north of the 2005 Naartok East resource limits and intercepted 14.32 g/t over 12m.

- A new type of mineralization was discovered approximately 400 meters north of the main Boston deposit. This zone is considered to be the folded extension of the main Boston B2 resource and is generally wider and lower grade than the main deposit. Some of the significant results were hole 06SBD345 which intercepted 3.4 g/t over 49.2 meters, hole 06SBD331 which intercepted 2.4 g/t over 69.6 meters and hole 06SBD349 which was near surface and returned 6.2 g/t over 16.5 meters.

- A sampling program on previous drilling that was incompletely sampled, including holes drilled from underground in 2000, resulted in the identification of significant mineralization near the main B2 zone including 54.2 g/t over 2 meters in hole 2000BUG361 and 118.5 g/t over 1 meter in hole 2000BUG362.

- Sufficient regional drilling was completed to meet required assessment obligations with only anomalous results.

- For more discussion on the results of the 2006 program, see the Company's press release issued on February 8, 2007.

On April 20, 2006, the Company reported its revised resource calculation incorporating the results of the successful exploration activities in 2005 on the Hope Bay Project. The revised resource calculation increased the total resources by 2.6 million ounces, or 40%. Given the potential for a large open pit operation at the Madrid deposit area, the Company was able to reduce the cutoff grade applied to those resources, which in part led to the reported increase. However, using the same cutoff grades as in 2004, approximately one million ounces were added to the total resources. On June 22, 2006, the Company released the results of an audit of the December 31, 2005 estimates for the Madrid deposit area resource zones, namely Naartok West, Naartok East and Rand.

The tables below summarize the reported resources at the Hope Bay Project as at December 31, 2005 as set forth in the independent technical report completed by Watts, Griffith and McOuat Limited ("WGM").



HOPE BAY INDICATED MINERAL RESOURCES AT DECEMBER 31, 2005

--------------------------------------------------------------------
Indicated
------------------- Cutoff Contained
Area/Deposit/Zone Tonnes g Au/t g Au/t Ounces Au(2)
--------------------------------------------------------------------
Madrid Deposit Area
Naartok East(1) 6,825,000 4.2 2 915,000
Naartok West(1) 5,023,000 4.3 2 699,000
Rand(1) 1,379,000 3.2 2 143,000
Suluk 1,125,000 4.2 2 153,000
South Patch N/A N/A
South of Suluk N/A N/A N/A
Subtotal Madrid 14,352,000 4.1 1,909,000
Doris Deposit
Doris Hinge(3) 345,000 34.7 8 385,000
Doris North/Connector N/A
Doris Central 824,000 12.9 5 341,000
Doris Pillars N/A N/A N/A
Subtotal Doris 1,169,000 19.3 726,000
Boston Deposit
Boston B2 1,949,000 11.4 4 713,000
Boston B3/B4 363,000 7.3 4 85,000
Subtotal Boston 2,312,000 10.7 798,000
Total Indicated(4) 17,834,000 6.0 3,433,000
--------------------------------------------------------------------
(1) Audited by WGM.
(2) Disclosure of contained ounces is permitted under Canadian
regulations; however, the United States Securities and Exchange
Commission generally permits mineralization that does not
constitute "reserves" to be reported only as in place tonnage
and grade.
(3) Includes the undiluted, unrecovered Probable Mineral Reserve for
Doris Hinge referred to below.
(4) Numbers may not add up exactly due to rounding.


HOPE BAY INFERRED MINERAL RESOURCES AT DECEMBER 31, 2005

--------------------------------------------------------------------
Inferred
------------------- Cutoff Contained
Area/Deposit/Zone Tonnes g Au/t g Au/t Ounces Au(2)
--------------------------------------------------------------------
Madrid Deposit Area
Naartok East(1) 7,157,000 3.7 2 847,000
Naartok West(1) 3,755,000 4.0 2 482,000
Rand(1) 3,860,000 2.8 2 352,000
Suluk 14,560,000 4.0 2 1,890,000
South Patch 227,000 22.5 7 164,000
South of Suluk 573,000 9.8 6 180,000
Subtotal Madrid 30,132,000 4.0 3,915,000
Doris Deposit
Doris Hinge 28,000 10.0 8 9,000
Doris North/Connector 1,270,000 13.9 5 569,000
Doris Central 73,000 12.8 5 30,000
Doris Pillars 263,000 18.6 5-7 158,000
Subtotal Doris 1,634,000 14.5 766,000
Boston Deposit
Boston B2 995,000 9.1 4 292,000
Boston B3/B4 1,437,000 9.7 4 449,000
Subtotal Boston 2,431,000 9.5 741,000
Total Inferred(3)(4) 34,197,000 4.9 5,421,000
--------------------------------------------------------------------
(1) Audited by WGM.
(2) Disclosure of contained ounces is permitted under Canadian
regulations; however, the United States Securities and Exchange
Commission generally permits mineralization that does not
constitute "reserves" to be reported only as in place tonnage and
grade. See discussion in the section on Forward Looking Statements
for a description of differences between Canadian and U.S. estimate
of mineral resources.
(3) Inferred Mineral Resources are reported in addition to Indicated
Mineral Resources.
(4) Numbers may not add up exactly due to rounding.


The Company reports a Probable Mineral Reserve of 458,200 tonnes grading 22 grams Au/t for the Doris Hinge zone which is included in the Indicated Mineral Resource. The Probable Mineral Reserve was estimated during the course of a Feasibility Study carried out by Steffen Robertson and Kirsten (Canada) Inc. on the Doris North Project in 2002. This Probable Mineral Reserve is included within the Indicated Mineral Resource reported in the table above entitled "Hope Bay Indicated Mineral Resource", to which dilution of 39% and a mining recovery factor of 95% have been applied.

During 2006, the Company continued to advance studies, including alternative mining concepts, which will assess the optimal mining and milling capacity for the next phase of development at Hope Bay. The results of the first pass of engineering studies in 2006 identified mining options of either 6,000 tonnes per day or 16,000 tonnes per day to be the focus of ongoing technical studies. These technical and economic studies are targeted to be completed in the second quarter of 2007. The results of these studies will define the direction for Phase 2 development of Hope Bay. The Company plans to commence a feasibility study on Phase 2 in the second half of 2007 and expects that the process will take 12-18 months to complete. Upon establishing the parameters for Phase 2, the Company will also embark on the project approval process in 2007 by filing a preliminary project description with NIRB and initiating the process to study the environmental impacts of the proposed project.

The Company continues to work towards obtaining permits and licenses for the Doris North Project. On March 6, 2006, NIRB issued its final hearing report recommending to the Minister of Indian and Northern Affairs Canada that the Doris North Project should proceed. On July 28, 2006, the Minister of Indian and Northern Affairs Canada accepted the NIRB recommendation. On September 20, 2006 NIRB finalized the terms and conditions of the Doris North Project and issued a project certificate. The Company has been working to obtain the permits and licenses which are required to begin mine construction. In September, the Company filed materials to support its application for amendment of Schedule II of the Metal Mining Effluent Regulations to include Tail Lake as a designated tailings impoundment area. Also in October, the Company prepared its submission to the Nunavut Water Board in preparation for public hearings expected in the first half of 2007. The Company continues to expect that the permitting process will proceed in a manner which will allow the Company to ship construction materials to the site in 2007. Depending on the outcome and timing of the permitting process, the Company could ship the necessary construction materials to the site in the summer of 2007, complete mine site preparation and construction during 2007 and 2008 and commence production in the second half of 2008. In January 2007, the Company engaged SNC-Lavalin to update the feasibility study which was completed on Doris North in 2003. The update is expected to be completed in the second quarter of 2007.

CAPITAL PROGRAMS

During 2006, the Company incurred capital expenditures of $34.8 million for exploration and project activities at Hope Bay and $1.4 million for property, plant and equipment compared to expenditures in 2005 of $19.2 million for exploration and project activities at Hope Bay and $0.1 million for property, plant and equipment.

FINANCING AND LIQUIDITY

At December 31, 2006, the Company had consolidated working capital of $143.7 million compared to $64.3 million at the end of 2005. At December 31, 2006, the Company had $149.8 million of cash and cash equivalents and short term investments compared to $68.7 million of cash and cash equivalents and short term investments at December 31, 2005. At December 31, 2006, the Company also had $15.3 million in cash collateral deposits for reclamation bonds which are classified outside of working capital.

At December 31, 2006, the Company had a short-term investment of $4.0 million in a highly-rated financial instrument with a maturity term of 91 days. The Company does not expect any material impact on its liquidity as a result of this investment.

On June 26, 2006 the Company entered into two concurrent equity underwriting agreements, one relating to a public offering of 19,200,000 common shares at $4.17 per share and the other to a private placement of 2,989,000 flow-through shares at $5.20 per share. On July 12, 2006, the Company completed both financings for aggregate gross proceeds of $95.6 million. As part of the public offering, the Company granted the underwriters an over-allotment option exercisable for a period of 30 days following the closing. On August 11, 2006 the underwriters exercised the over-allotment option and purchased 1,113,000 common shares for additional gross proceeds of approximately $4.6 million. The underwriters received a total cash commission of $5.0 million in payment for their services. As required by the private placement flow through agreement, the Company must incur Canadian exploration expenditures as defined by the Income Tax Act (Canada) totaling approximately $15.5 million by December 31, 2007. The Company proposes to use the proceeds from these financings to, in large part, continue exploration and development of the Hope Bay Project, including in-fill drilling programs on the current known resources, exploration drilling programs with the objective of identifying new resources, geotechnical studies and drilling to define infrastructure-related parameters, and feasibility and environmental studies for the next phase of development.

On November 30, 2006, the Company completed an equity private placement of 2,040,820 flow-through shares at $7.35 per share for total gross proceeds of $15.0 million. The underwriter received a cash commission of 4% of the gross proceeds in payment for its services. The Company will be required to incur Canadian exploration expenditures as defined by the Income Tax Act (Canada) totaling $15.0 million by December 31, 2007.

The Company believes it has sufficient cash resources and liquidity to sustain its planned activities in 2007 and to complete initial construction planned in 2007 for Phase 1 mine development. The future exploration and development of the Hope Bay Project may require the Company to raise additional capital through a combination of project debt and equity financings. The Company's strategy is to use equity financing for exploration activities and the maximum amount of project debt to build mining infrastructure until sufficient cash flow is generated from mining production.

LIABILITIES AND CONTINGENCIES

The Company has the legal obligation to reclaim properties for which it holds water licenses and exploration and mining agreements. The Company has estimated these asset retirement obligations at December 31, 2006, in accordance with accounting guidelines described above, to be an aggregate of $23.4 million on an undiscounted basis. The properties for which these obligations have been estimated are the Con Mine in Yellowknife and the Hope Bay Project in Nunavut. The Company has established cash deposits as collateral for letters of credit pledged in favour of various governmental agencies and others under several water licenses and mineral exploration and mining agreements. The Company has also established two reclamation security trusts for the reclamation of the Con Mine. The Company has reclamation security trusts totaling $10.9 million and cash collateral deposits totaling $4.4 million for Hope Bay and other properties.

The reclamation security trusts for the Con Mine were established on December 31, 2004. The Company deposited $9 million of the $10 million proceeds from the sale of its Bluefish hydroelectric facility into a reclamation security trust, in accordance with an agreement with the Department of Indian and Northern Development. The remaining $1 million of the proceeds was deposited into a second reclamation security trust. The proceeds from any subsequent sale of Con Mine assets will also be deposited into this second reclamation security trust. The cost of reclamation was estimated by Golder and Associates and the Company on the basis of a final closure and reclamation plan which was submitted to the McKenzie Valley Water Board in January 2007. Based on comments received from the regulatory review process, the Company has estimated the impact of the required changes to the plan and recorded an appropriate increase to the liability at December 31, 2006. Any further changes upon receiving final approval of the plan could result in an increase to the estimated liability.

In 1995, the Corporation entered into a joint exploration transaction with an investor that resulted in a renunciation of certain resource expenses being made to the investor. The amount of the renunciation was based upon an independent valuation prepared for the Corporation relating to the Con Mine assets. In 2000, the Canada Revenue Agency (the "CRA") issued a reassessment notice challenging the valuation that formed the basis for this transaction. The reassessment does not give rise to any taxes payable by the Corporation. However, as part of the original transaction, the Corporation agreed to compensate the investor for any shortfall in the renunciation made by the Corporation to a maximum of $2.7 million plus accrued interest. Subsequent to December 31, 2006, the Corporation and the CRA reached a settlement regarding the reassessment which preserves the amount of the renunciation originally made to the investor. Accordingly, the Corporation no longer has a contingent liability with respect to possible payments to the investor.

In September 2006, the Company signed the IIBA with the KIA which establishes the terms which will apply to Doris North mine operations with respect to benefits to the Inuit people of the Kitikmeot region. Included in the agreement are specific payments totaling $1.4 million which would be made to the KIA subject to the successful completion of certain project milestones such as a positive production decision made by the Company and receipt of its water license. Also in September 2006, the Company completed a water compensation agreement with the KIA for the use of the proposed lake for tailings disposal. The agreement establishes total compensation of $0.9 million to be paid by the Company over a three year period following a positive production decision made by the Company.

Contractual Obligations

The following table summarizes the contractual obligations as at December 31, 2006 of the Company for each of the five years commencing with 2007 and thereafter, in thousands of dollars.



2007 2008 2009 2010 2011 Thereafter
-------------------------------------------------
Oxygen plant $ 600 $ - $ - $ - $ - $ -
Office lease costs $ 336 $ 336 $ 344 $ 260 $ 260 $ 245
Exploration equipment $ 611 $ 95 - - - -
Site reclamation(1) $ 8,473 $ 4,098 $ 2,715 $ 1,328 $ 369 $ 5,096

(1) The Company is obligated to fund closure and reclamation costs for its
mining and exploration operations as a condition of associated water
licenses. However, the timing of the payments has not been determined
with certainty and may change depending upon future events.
Reclamation of exploration sites will be deferred to the extent that
the Company continues to be engaged in actively exploring them.


Subsequent to December 31, 2006, the Company entered into a purchase commitment of approximately $5.7 million to acquire a 118-person camp facility from a manufacturer. Under the terms of the agreement, the Company will pay the construction costs for the camp facility prior to its shipment to the Hope Bay site, which is expected to be in July 2007. The Company has the right to transfer its obligations under the purchase agreement to a third party.

For additional information related to the Company's obligations and commitments see note 15 to the annual consolidated financial statements.

Off Balance Sheet Arrangements

The Company does not have any off balance sheet arrangements other than the pension obligations which are described in note 13 of the annual consolidated financial statements.

OUTLOOK

The outlook for the Company is dependent on the successful exploration and development of the Hope Bay Project. The Company controls 100% of the Hope Bay Project, which has indicated resources totaling 3.4 million ounces of gold at a grade of 6.0 grams per tonne and an additional 5.4 million ounces of gold at a grade of 4.9 grams per tonne in the inferred category.

The Company plans to continue to work towards making a production decision on the Doris North Project, including advancement of the permitting process. The Company believes that it will be successful in addressing the concerns of the regulatory agencies and, if the permitting process is successfully completed, the Company will make a final decision on a commitment to the construction process. If the project is approved by the Company, production could commence during 2008. The Company has engaged SNC-Lavalin to update the feasibility study which was completed on Doris North in 2003 and the update is expected to be completed in the second quarter of 2007. There can be no assurance that the permitting process will be completed as planned or that the Company will develop the Doris North Project as anticipated.

As part of the Company's development strategy for Hope Bay, programs have been completed that were designed to facilitate delivery of studies which include alternative mining concepts. These alternative concepts will assess the optimal mining and milling capacity for the next phase of development at Hope Bay. The two options under consideration are: a) an underground operation with a targeted production of approximately 300,000 ounces of gold annually, and b) the Large Pit Concept at Madrid based upon satellite underground deposits at Boston and Doris which has targeted production of approximately 600,000 ounces of gold annually. These technical and economic studies are targeted to be completed in the second quarter of 2007. The results of these studies will define the direction for Phase 2 development of Hope Bay. The Company plans to commence a feasibility study on Phase 2 in the second half of 2007 and expects that the process will take 12-18 months to complete. Upon establishing the parameters for Phase 2, the Company will also embark on the project approval process in 2007 by filing a preliminary project description with NIRB and initiating the process to study the environmental impacts of the proposed project.

The Company anticipates that final approval for the Con Mine closure and reclamation plan will be received in 2007 which will permit the Company to conduct final reclamation activities in subsequent periods. On June 30, 2005, the Company returned the Giant Mine property to the Department of Indian and Northern Development in accordance with the terms of the acquisition agreement. The Company does not have any ongoing reclamation obligations for the Giant Mine.

RISKS AND UNCERTAINTIES

The following risks and uncertainties, as well as risks not currently known to the Company, could materially affect the Company's future performance:

- The Company will require external financing and production revenue to conduct further exploration on and development of its mineral resource properties and to develop the Doris North deposit.

- The Company has had no revenue from operations and no ongoing mining operations of any kind.

- Changes in the market price of gold and other metals, which in the past has fluctuated widely, will significantly affect the potential of the Company's properties.

- The Company has no history of producing gold from the Hope Bay Project and there can be no assurance that it will successfully establish mining operations or profitably produce gold.

- There can be no assurance that the Company's exploration programs will result in the establishment of mineral reserves or the expansion of such reserves with new mineral reserves.

- The Company has a history of losses and expects to incur losses for the foreseeable future.

- The figures for the Company's mineral reserves and mineral resources are estimates based on interpretation and assumptions and the Company's mineral deposits may yield less mineral production under actual conditions than the Company's estimates indicate.

- The Company requires various permits in order to conduct its current and anticipated future operations and delays or a failure to obtain such permits, or a failure to comply with the terms of any such permits that the Company has obtained, could have a material adverse impact on the Company.

- The Company's permits, licences and mineral rights to the Hope Bay Project may be subject to challenges by the Inuit based on the duty of the Canadian Federal Government to consult.

- The Hope Bay properties are subject to the Nunavut Land Claims Agreement and ongoing operations are affected by working relationships with Inuit organizations.

- The Company is subject to significant governmental regulations.

- The Company's activities are subject to environmental laws and regulations that may increase its costs of doing business and restrict its operations.

- Mining is inherently dangerous and subject to conditions or events beyond the Company's control, which could have a material adverse effect on its business.

- Changes in the factors underlying the Doris North feasibility study since its preparation may make the financial calculations no longer applicable; actual capital costs, operating costs, production and economic returns from the Doris North deposit may differ significantly from those the Company has anticipated; and there are no assurances that any future development activities will result in profitable mining operations.

- Because the Hope Bay Project is located in Canada and will have production costs incurred in Canadian dollars, while gold is generally sold in United States dollars, the Hope Bay Project results could be materially adversely affected by appreciation of the Canadian dollar.

- Increased competition could adversely affect the Company's ability to attract necessary capital funding or acquire suitable producing properties or prospects for mineral exploration in the future.

- Title to the Company's mineral properties cannot be guaranteed and may be subject to prior unregistered agreements, transfers or claims and other defects.

- The Company may experience difficulty attracting and retaining qualified management and operations personnel to meet the needs of its anticipated growth, and the failure to manage the Company's growth effectively could have a material adverse effect on its business and financial condition.

- The Company has ongoing reclamation on the Con Mine and the Company may be required to contribute more funds towards the abandonment and reclamation of the Con Mine site which could have a material adverse effect on its financial position.

- The Company does not currently have any ongoing reclamation on the Golden Eagle Mine but it is possible that there may be a future obligation to conduct reclamation on the Golden Eagle Mine site, which could have a material adverse effect on the Company's financial position.

- The Company or its subsidiaries are from time to time a party to litigation which could have a material effect on the Company.

OUTSTANDING SHARE DATA

As at March 30, 2007, there were 217,634,803 common shares outstanding. As at March 30, 2007, there were options and warrants outstanding to purchase an aggregate of 26,011,373 common shares. The options and warrants were granted to certain of the Company's executive officers, directors and employees (7,511,373 stock options) and to Newmont as part of a private equity placement completed in 2005 (18,500,000 warrants).

RELATED PARTIES

The Company owns 7.3% of Maximus Ventures Ltd. ("Maximus"), a company related by virtue of common directors. The Company supplied services on a cost recovery basis to Maximus which totaled $1.0 million during the year (2005 - $1.2 million). Transactions with related parties are recorded at their exchange amount which is the amount of consideration received as established and agreed to by the Company and Maximus.

NEW ACCOUNTING STANDARDS

The Accounting Standards Board of the Canadian Institute of Chartered Accountants ("CICA") issued Section 3855, Financial Instruments -- Recognition and Measurement, Section 3861, Financial Instruments --Disclosure and Presentation, Section 3865, Hedges, and Section 1530, Comprehensive Income, all applicable to the Company for annual or interim accounting periods beginning on January 1, 2007.

Section 3855 requires all financial assets, financial liabilities and non-financial derivatives to be recognized on the balance sheet and measured based on specified categories. Section 3861 identifies and details information to be disclosed in the financial statements. The Company is currently assessing the full impact of this new standard on its financial reporting. However, it is expected that the most significant impact will be to increase the carrying value of the remaining investment in Sherwood Copper Corporation and other investments to their fair value at the end of a reporting period.

Section 3865 sets out when hedge accounting can be applied and builds on existing Canadian GAAP guidance by specifying how hedge accounting is applied and disclosed. The Company currently does not have any hedging contracts and, therefore, does not expect any impact of the new standard to the financial statements.

Section 1530 introduces new standards for the presentation and disclosure of the components of comprehensive income. Comprehensive income is defined as the change in net assets of an enterprise during a reporting period from transactions and other events and circumstances from non-owner sources. The Company is currently evaluating the full impact of the standards and will be required to present a new statement entitled "Comprehensive Income" in the first quarter of 2007.

The CICA also issued Section 1506, Accounting Changes, which revises the current standards on changes in accounting policy, estimates or errors as follows: voluntary changes in accounting policy are allowed only when they result in financial statements that provide reliable and more relevant information; changes in accounting policy are to be applied retrospectively unless doing so is impracticable; changes in estimates are to be recorded prospectively; and prior period adjustments are to be corrected retrospectively. In addition, this standard calls for enhanced disclosure about the effects of changes in accounting policies, estimates and errors on the financial statements.

Section 1506 is applicable for the Company for the financial year beginning January 1, 2007. The impact of Section 1506 cannot be determined until such time as the Company makes a change in accounting policy.

FORWARD-LOOKING STATEMENTS

Statements relating to exploration work at the Hope Bay Project and the expected results of this work and strategies, plans, studies and permitting for the development of the Hope Bay Project, statements related to analyses of financial condition, future results of operations and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management are forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and the securities legislation of certain provinces of Canada. Forward looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects", "plans", "anticipates", "believes", "intends", "estimates", "projects", "satisfies", "potential", "goal", "objective", "prospective", "strategy", "target", and similar expressions, or that events or conditions "will", "would", "may", "can", "could" or "should" occur. Information inferred from the interpretation of drilling results and information concerning mineral resource estimates may also be deemed to be forward looking statements, as it constitutes a prediction of what might be found to be present when and if a project is actually developed. These forward-looking statements are subject to a variety of risks and uncertainties which could cause actual events or results to differ materially from those reflected in the forward-looking statements, including, without limitation: risks related to fluctuations in gold prices and currency exchange rates; uncertainties related to raising sufficient financing to fund the planned work in a timely manner and on acceptable terms; changes in planned work resulting from weather, logistical, technical or other factors; the possibility that results of work will not fulfill expectations and realize the perceived potential of the Company's properties; uncertainties involved in the interpretation of drilling results and other tests and the estimation of gold reserves and resources; the possibility that required permits may not be obtained on a timely manner or at all; the possibility that capital and operating costs may be higher than currently estimated and may preclude commercial development or render operations uneconomic; risk of accidents, equipment breakdowns and labour disputes or other unanticipated difficulties or interruptions; the possibility of cost overruns or unanticipated expenses in the work program; the risk of environmental contamination or damage resulting from Miramar's operations, risks and uncertainties described under "Risks and Uncertainties" and elsewhere in the Management's Discussion and Analysis, and other risks and uncertainties, including those described in the Miramar's Annual Report on Form 40-F for the year ended December 31, 2006 and Reports on Form 6-K filed with the Securities and Exchange Commission.

Forward-looking statements are based on the beliefs, estimates and opinions of Miramar's management on the date the statements are made. Miramar undertakes no obligation to update these forward-looking statements if management's beliefs, estimates or opinions, or other factors, should change.

All resource estimates reported in this disclosure are calculated in accordance with the National Instrument 43-101 of the Canadian securities administrators and the Canadian Institute of Mining and Metallurgy Classification system. These standards differ significantly from the requirements of the United States Securities and Exchange Commission, which permits U.S. mining companies in their Securities and Exchange Commission filings to disclose only those mineral deposits that qualify as proven or probable "reserves" because a determination has been made based on an appropriate feasibility study that the deposits could be economically and legally extracted or produced, and, accordingly, resource information reported in this disclosure may not be comparable to similar information reported by United States companies. The term "resource(s)" does not equate to "reserves" and normally may not be included in documents filed with the Securities and Exchange Commission, and investors are cautioned not to assume that "resources" will be converted into "reserves" in the future.

This disclosure uses the term "inferred resources". While this term is recognized by Canadian securities regulations concerning disclosures by mining companies, the U.S. Securities and Exchange Commission does not recognize it. "Inferred resources" have a great amount of uncertainty as to their existence and as to their economic and legal feasibility. It cannot be assumed that all or any part of the "inferred resources" will ever be upgraded to a high category. Under Canadian securities regulations, estimates of "inferred resources" may not form the basis of feasibility or pre-feasibility studies except in rare cases. Investors are cautioned not to assume that part or all of an "inferred resource" exist or are economically or legally feasible.

Additional Information

Additional information regarding the Company is included in the Company's Annual Information Form ("AIF") and Annual Report on Form 40F, which are filed with the Canadian securities regulators and the United States Securities and Exchange Commission, respectively. A copy of the Company's AIF is posted on the SEDAR website at www.sedar.com. A copy of the Form 40F can be obtained from the United States Securities and Exchange Commission website at www.sec.gov.

Contact Information